Does It Ever Make Sense To Take Annuity Cash Out?

You've seen the commercials advertising lump sum payouts in return for annuities

, pensions, and structured settlements. You've probably also heard horror stories of those who took an annuity buy out, then were left with nothing after they went through their lump sum payment.

Most of the horror stories are somewhat overblown. Companies that buy annuities are heavily regulated by the government. Those who takeannuity cash out have to be informed of exactly what they will be receiving and what they will give up in turn. An annuity cash out can be a great way to get funds that you need when you need them. It's important to carefully weigh the pros and cons, though.

Most companies that buy annuities operate in more or less the same manner. The general idea is that you sign over your pension, annuity, or structured settlement to them. The annuity buyer then receives those payments (or a percentage of them, depending on how you structure theannuity buy out). In return, you receive a set amount of cash, up front.

There are a number of situations in which it makes sense to see an annuity buyer. Here are a few of the instances in which an annuity cash out may be a sound financial decision.

Paying off long term loans. If you are in danger of defaulting on a long term loan, especially a mortgage, it may make sense to take an annuity cash out in order to get yourself back on track. This can be especially beneficial if it allows you to pay off the loan or mortgage in full, as it can save you a lot of money in interest.

When you want to start a business. In this case, you're giving up one income stream in order to have the capital to start a new income stream. Starting a business is a dream many wait a lifetime to achieve. If you have money in an annuity or other structured payment plan, but want to keep working and earning an income, an annuity buy out can be a godsendprovided you still have enough working years to save for retirement.

When you want to train for new employment. Maybe you don't want to start your own business, but you don't want to retire yet, either. Still, jobs are scarce unless you have an education or specialized training. In some cases, it makes sense to leverage your annuity. Companies that buy annuities can help you get the money you need to pay for the education or training that can lead to a fulfilling new career.

When you need cash and aren't dependant on the annuity for life's expenses. In these days, it's not uncommon for people to have multiple income streams. If you're receiving money from an annuity that you don't need for your day to day living expenses, but are held back by debts or need cash for some other reason, it can make sense to take an annuity buyout.

by: Mark S. Graham

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